Solved problem 4.

1
Current assets 1,600
Current liabilities 1,000
Minimum current ratio 1.25
Maximum borrowing 1400

Solved problem 4.2

Current ratio 1.4
Acid-test ratio 1.2
Current liabilities 1,600
Inventory turnover ratio 8
Current assets 2,240
Inventories 320
Sales 2,560

Solved problem 4.3

Net profit margin ratio 4%
Current ratio 1.25
Return on net worth 15.23%
Total debt to total assets ratio 0.4
Inventory turnover ratio 25
Solution are the figures in italics in the following statements
Profit and Loss account
Sales 2535.8
Cost of goods sold 1587.9
Operating expenses 700
Profit before interest and tax 247.9
Interest 45
Profit before tax 202.9
Tax provision at 101.4
50%
Profit after tax 101.4
Balance sheet
Net worth 666 Fixed assets
Long-term debt: interest at Current assets
15% 300 Cash
Accounts payable 144 Receivables
Inventory
Total 1110 Total

Solved problem 4.4

Rs.in million
Profit & Loss Account for year ending 31st20X1
March 20X0
Net sales 1065 950
Cost of goods sold 805 720
Stocks 600 520
Wages and salaries 120 110
Other manufacturing expenses85 85 90
Gross profit 260 230
Operating expenses 90 75
Depreciation 50 40
Selling and general administration 40 35
Profit before interest and tax 170 155
Interest 35 30
Profit before tax 135 125
Tax 50 45
Profit after tax 85 80
Dividends 35 30
Retained earnings 50 50
Balance sheet as at 31st March 20X1 20X0
Sources of Funds
Shareholders' funds 505 455
(a) Share capital 125 125
(b) Reserve and surplus 380 330
Loan funds 280 260
(a) Secured loans 180 160
(i) Due after 1 year 130 135
(ii) Due within 1 year 50 25
(b) Unsecured loans 100 100
(i) Due after 1 year 60 70
(ii) Due within 1 year 40 30
Total 785 715
Application of Funds
Net fixed assets 550 495
Investments 30 25
(a) Long - term investments 20 20
(b) Current investments 10 5
Current assets, loans and advances 355 333
(a) Inventories 160 138
(b) Sundry debtors 120 115
( c) Cash and bank balances 25 20
(d) Loans and advances 50 60
Less: Current liabilities and provisions 150 138
Net Current assets 205 195
Total 785 715
Current ratio 1.52
Acid-test ratio 0.85
Cash ratio 0.15
Debt-equity ratio 0.55
Interest coverage ratio 4.86
Fixed charges coverage ratio 1.24
Inventory turnover 5.40
Debtors turnover 9.06
Average collection period in days 40.27
Fixed assets turnover 2.04
Total assets turnover 1.42
Gross profit margin 24.4%
Net profit margin 7.98%
Return on assets 11.3%
Earning power 22.7%
Return on equity 17.7%